OPINION
In this complicated dispute, the Panel is asked to review the opinions and orders of the bankruptcy court entered in a reopened chapter 11 3 real estate partnership reorganization case, and in particular, the state tax consequences of confirmation of the debtor’s plan for its former partners. While the substantive issues raised in this appeal involve interesting, complex questions about the interplay of bankruptcy and tax law, we may not comment on those issues. Instead, the Panel is compelled to reverse the bankruptcy court’s ruling that it had subject matter jurisdiction to adjudicate the issues in this contest, to vacate the orders of the bankruptcy court, and to remand this matter to the bankruptcy court with instructions that it dismiss.
Events Before the Reopening of the Bankruptcy Case.
Wilshire Courtyard (“Wilshire”) was a California general partnership. 5 We refer to its general partners, the appellees in this appeal, collectively as the ‘Wilshire Partners.”
Wilshire began operations in 1984. By 1987, Wilshire had developed and owned two commercial complexes on Wilshire Boulevard in Los Angeles containing almost a million square feet of rental office space (the “Property”).
In 1989, Wilshire entered into several financing agreements concerning the Property. As a result of these transactions, the secured lender holding the first position lien on the Property was Continental Bank, N.A. (“Continental”); various other entities held subordinated secured debt. Wilshire’s combined secured debt aggregated almost $350 million. Wilshire defaulted on the Continental loan in July 1996, and Continental scheduled a foreclosure sale for July 9, 1997. In response, Wilshire filed a chapter 11 bankruptcy petition on July 8,1997.
Appellant California Franchise Tax Board (“CFTB”) was listed in the creditor’s matrix filed by Wilshire. CFTB acknowledges that it received the initial notice of the commencement of the case sent out by the clerk of the bankruptcy court. However, for the reasons discussed below, CFTB did not file a proof of claim, assert any other claim, nor otherwise participate in Wilshire’s bankruptcy case.
Early in the bankruptcy case, Continental was acquired by Bank of America (“BA”). 6 BA, Wilshire, and the Wilshire Partners eventually negotiated a joint, consensual plan of reorganization. Under the terms of the joint plan, when it became effective, Wilshire would be restructured from a California general partnership to a Delaware limited liability company. It would continue to own and operate the Property. Wilshire would arrange for a new, nonrecourse loan for $100 million, secured by a first deed of trust on the Property.
For its part in the reorganization, BA agreed to contribute $28 million to the reorganized Wilshire, and to release its secured indebtedness, in exchange for its receipt of the $100 million in new loan proceeds. In consideration of its agreements, BA would receive a 99 percent ownership interest in the reorganized Wil-shire; the Wilshire Partners would receive the remaining one percent interest. For giving up almost all of their former equity in the business, the Wilshire Partners would also receive $3.5 million in cash, and a $450,000 loan.
Wilshire’s disclosure statement was approved by the bankruptcy court on February 19, 1998. The disclosure statement did not address the state tax consequences for the Wilshire Partners as a result of the transactions proposed in the reorganization plan.
After the confirmation hearing, the bankruptcy court entered an Order Confirming the Joint Plan of Reorganization on April 14, 1998. CFTB acknowledges that it received the “Notice of Order Confirming [Wilshire’s] Chapter 11 Plan” from the clerk of the bankruptcy court, which stated in relevant part that, “Notice is hereby given of the entry of an order of this Court confirming a Plan of Reorganization. A copy of the order and the plan itself are contained in the Court file located at the address listed herein.”
A plan having been confirmed, the Wil-shire case was closed by the bankruptcy court in an order entered on October 22, 1998. Wilshire contends, and CFTB has not effectively disputed, that the confirmed plan was implemented and consummated, in that the restructure of the reorganized Wilshire, and the various transfers and transactions contemplated by the confirmed plan, were all completed.
After the plan was confirmed, the various Wilshire Partners reported approximately $208 million in aggregate cancellation of debt income (“CODI”) on their individual 1998 California state tax returns. Then, on November 15, 2002, CFTB sent Wilshire and the Wilshire Partners an “Audit Issue Presentation Sheet” (“AIPS”). The AIPS informed them that CFTB challenged the Wilshire Partners’ characterization of the tax consequences of the transactions effected by the confirmed chapter 11 plan as CODI. Rather than $208 million in CODI, CFTB argued that the Wilshire Partners should have reported approximately $231 million in capital gain income arising from the plan transactions, because the treatment of their interests under the plan constituted a disguised sale of the Property. Based on the AIPS, CFTB issued notices of proposed assessments to the Wilshire Partners on June 15, 2004, totaling approximately $13 million in unpaid income taxes.
The Wilshire Partners disputed CFTB’s position. Over the next five years, CFTB and The Wilshire Partners engaged in several rounds of administrative hearings relating to this dispute. 8
Reopening of the Bankruptcy Case.
On May 27, 2009, the contest shifted back to the bankruptcy court. Wilshire filed an
ex parte
motion to reopen the bankruptcy case. As cause for reopening, Wilshire argued that, through the AIPS and the continuing administrative hearings, CFTB was attempting to collaterally attack the confirmed chapter 11 plan by characterizing its terms as effecting a disguised sale of the Property while, according to the plan, Wilshire had retained ownership of the Property. The bankruptcy
Wilshire then filed a motion for an Order to Show Cause Re Contempt (“OSC”) on June 23, 2009. The bankruptcy court entered the OSC on August 12, 2009, directing CFTB to appear before the bankruptcy court to show why it should not be held in contempt for collaterally attacking, and by refusing to act in accordance with, the plan and confirmation order.
CFTB responded to the OSC on August 27, 2009, arguing that Wilshire had not given CFTB adequate notice of the terms of the proposed plan, the time for objecting to the plan, or of the confirmation hearing, so CFTB was not bound by the plan and confirmation order; Wilshire lacked standing to prosecute the OSC motion; issuance of a contempt order by the bankruptcy court against CFTB would be fundamentally unfair, because the state tax consequences of the plan terms were never considered, and would have been beyond the authority of the bankruptcy court to determine; and Wilshire was guilty of laches because it had delayed raising these issues in the bankruptcy case for six years.
Wilshire replied on September 9, 2009, arguing that CFTB received adequate notice of the filing of the bankruptcy case and proceedings and entry of the confirmation order; Wilshire had both prudential and constitutional standing to seek enforcement of the confirmation order. CFTB could not prove its affirmative defense of laches.
The bankruptcy court held an initial hearing on the OSC on September 15, 2009. Wilshire and CFTB appeared by counsel; the Wilshire Partners, however, were not represented. After hearing arguments of counsel, the bankruptcy court directed the parties to submit further briefing whether a contempt motion was proper under the circumstances of this case, and suggested that the individual Wilshire Partners should be joined as parties to the proceedings.
After a continued status conference, on March 12, 2010, acting under authority of Rule 7019, made applicable in contested matters by Rule 9014(c), the bankruptcy court ordered the joinder of the Wilshire Partners in the proceedings. None of the Wilshire Partners objected to the joinder order.
Wilshire and the Wilshire Partners filed a joint Motion for Summary Judgment or Summary Adjudication of Issues on May 3, 2010. In the motion, they repeated Wil-shire’s earlier allegations concerning CFTB’s receipt of adequate notice in the chapter 11 case, that CFTB’s characterization of the plan transactions as a disguised sale amounted to a collateral attack on the plan, and that the confirmation order should be enforced under applicable provisions of the Bankruptcy Code.
CFTB filed an opposition to the summary judgment motion on June 9, 2010, generally countering .these allegations. In addition to its earlier arguments, CFTB also argued that the bankruptcy court lacked subject matter jurisdiction to decide the motion, and that even if it had jurisdiction, the bankruptcy court should abstain from considering the tax issues. If the bankruptcy court was inclined to resolve the tax issues, and to decide whether the plan transactions did indeed result in CODI rather than capital gain, CFTB requested a six-month continuance to undertake discovery on that issue.
Wilshire and the Wilshire Partners responded to CFTB’s opposition on June 16, 2010, generally repeating and supporting their earlier arguments.
The bankruptcy court conducted a hearing on both the OSC and summary judg
V. The Joint Plan and all agreements, settlements, transactions and transfer contemplated thereby do not provide for, and when consummated will not constitute, the liquidation of all or substantially all of the property of the Debtor’s Estate under Bankruptcy Code section 1141(d)(3)(A)[.]
Order Confirming the Debtor’s Joint Plan of Reorganization Dated December 12, 1997 at HV (entered April 14, 1998) (“Finding V”). Interpreting the meaning of this provision of the order, the bankruptcy judge stated: “I’m determining that the finding in the confirmation order is that the transaction provided for in the plan was not a sale for any purpose.... [Bjecause it’s not a sale there’s no tax imposed on the partnership. There’s no gain to be taxed [to] the partnership.” Hr’g Tr. 40:7-15 (June 22, 2010). However, the bankruptcy court was uncertain as to the tax consequences to the Wilshire Partners, and requested further briefing from the parties.
Both parties filed supplemental briefs. On July 15, 2010, the bankruptcy court entered an Order for Summary Adjudication, memorializing its oral ruling at the June 22 hearing that, according to Finding V, “the transaction under the plan is not a sale or exchange for any purpose.”
The bankruptcy court held a second hearing on the summary judgment motion on July 20, 2010. Early in the hearing, the court noted that its July 15, 2010 order interpreting Finding V was effective only as to Wilshire, and only tentative as to the individual Wilshire Partners. After hearing the arguments of the parties, the bankruptcy court announced it would grant summary judgment to Wilshire and the Wilshire Partners. Among the rulings made by the bankruptcy court were that: (a) § 1141 provides that all creditors are bound by the plan, and this includes the CFTB; (b) the terms of the confirmed plan also apply to the Wilshire Partners; (c) and the CFTB’s actions constitute contempt of the confirmation order, and CFTB would be ordered to cease and desist. Hr’g Tr. 30:1-3; 8-9; 18-19 (July 20, 2010).
On July 26, 2010, CFTB filed a timely appeal of the bankruptcy court’s July 15, 2010 order, its July 20 oral rulings, together with “any judgment, order or decree related to the July 20, 2010 decision.”
On August 31, 2010, the bankruptcy court entered a published “Opinion on Summary Judgment Motion” (the “Opinion”).
In re Wilshire Courtyard,
The court holds that the interests of the [Wilshire Partners] are wholly derivative from the status of the property in the partnership. In consequence, [C]FTB cannot recharacterize the plan transactions at the partner level without rechar-acterizing them at the partnership level as well. Because [C]FTB has not brought any such recharacterization application before this court (and cannot because the statute of limitations has run), [C]FTB is prohibited by the plan from claiming that the partners can be taxed on the plan transactions as a sale generating taxable income.
Id. at 383.
On October 4, 2010, the bankruptcy court entered a final “Order Granting Summary Judgment.” With some minor discrepancies, this final order was consistent with the Opinion. 9
On September 13, 2010, CFTB filed an amended notice of appeal, now seeking review of the July 15 order, the July 20 oral decision, the August 31 Opinion, and the October 4, 2010 Order Granting Summary Judgment.
JURISDICTION
CFTB challenges the bankruptcy court’s decision that it had subject matter jurisdiction to resolve the issues in this case. This contention is addressed in detail below. There is no challenge to the Panel’s jurisdiction over this appeal, however, which is clear under 28 U.S.C. § 158.
ISSUE
Whether the bankruptcy court had subject matter jurisdiction to adjudicate the issues in this appeal.
STANDARD OF REVIEW
The existence of subject matter jurisdiction is a question of law reviewed
de novo. Atwood v. Fort Peck Tribal Court Assiniboine,
DISCUSSION
The bankruptcy court lacked subject matter jurisdiction to adjudicate the Wilshire Partners’ state tax obligations.
CFTB asserts numerous arguments challenging the merits of the bankruptcy court’s rulings that CFTB may not pursue recovery from the Wilshire Partners for capital gains taxes allegedly due under state law. Wilshire and the Wilshire Partners dispute CFTB on each substantive point, urging the Panel to affirm the decisions of the bankruptcy court. However, before we may review the parties’ arguments concerning the substance of this dispute, the Panel must conclude that the
The decisions of the Ninth Circuit guide us to our conclusion.
10
In determining the scope of a bankruptcy court’s jurisdiction, we begin with the statutory scheme, because the “jurisdiction of the bankruptcy courts, like that of other federal courts, is grounded in, and limited by, statute.”
Battle Ground Plaza, LLC v. Ray (In re Ray),
Because in many respects the bankruptcy courts’ statutory jurisdiction is narrow in focus, we individually examine each potential basis for the bankruptcy court’s assertion of subject matter jurisdiction, below.
I. “Arising under” and “arising in” jurisdiction.
Only when a right to relief is created by title 11 does an action to enforce that right “arise under title 11.”
Harris v. Wittman (In re Harris),
In our view, adjudication of the dispute between the Wilshire Partners and CFTB does not implicate either the bankruptcy court’s arising under or arising in jurisdiction. No provision of the bankruptcy code dealing with state tax consequences is at issue, nor were other chapter 11 provisions used by Wilshire in an attempt to restructure the tax consequences of plan confirmation. Instead, reduced to its essence, the contest in the bankruptcy court in this case concerned whether, because of the terms of the order confirming Wilshire’s reorganization plan,
11
the Wil-
It is equally clear that this dispute does not “arise in” a case under the bankruptcy code. Under the case law, this language in the jurisdictional statute refers to an “administrative matter unique to the bankruptcy process that has no independent existence outside of bankruptcy and could not be brought in another forum, but whose cause of action is not expressly rooted in the bankruptcy code.”
In re Ray,
The Wilshire Partners disagree, and instead suggest that this contest could not
“feasibly
be adjudicated in any alternate forum due to the procedures applicable to the adjudication of tax disputes.” Wilshire Partner’s Reply Br. at 7 (emphasis added). They explain that, under California law, a taxpayer has no recourse to the state courts until after a disputed tax is paid, at which point the taxpayer may sue for a refund.
Nast v. St. Bd. of Equalization,
The Wilshire Partners’ argument that the state proceedings were not “feasible” lacks merit in the context of determining the subject matter jurisdiction of the bank
Second, there is nothing in the bankruptcy code or case law that provides that the “arising in” jurisdiction of a bankruptcy court requires that the proceedings available in the alternative forum be prompt or feasible. The requirement for bankruptcy court jurisdiction is that an action have “no independent existence outside of bankruptcy and
could not
be brought in another forum.”
In re Ray,
Simply put, the issues raised by Wilshire and the Wilshire Partners in this case did not “arise under” the bankruptcy code, nor “arise in” a bankruptcy case.
2. “Related to” jurisdiction.
In response to CFTB’s challenge, the bankruptcy court addressed the question of its subject matter jurisdiction in its Opinion. Although the court did not employ the precise terms, we construe its holding to be that it had “related to” jurisdiction under 28 U.S.C. § 1334(b), ancillary jurisdiction to interpret the plan and confirmation order, and supplemental jurisdiction over the claims of the nondebtor Wilshire Partners. Under the applicable case law, we respectfully disagree that jurisdiction existed under any of those grounds.
Whether the bankruptcy court had related to jurisdiction is a harder question than arising in or arising under, because this jurisdictional component covers a much broader set of disputes, actions and issues. Indeed, related to jurisdiction arguably includes almost every matter or action that directly or indirectly relates to a bankruptcy case.
Sasson v. Sokoloff (In re Sasson),
The bankruptcy court explained its view of its related to jurisdiction in this case as follows:
[Tjhough a bankruptcy court has more limited subject matter jurisdiction post-confirmation than pre-confirmation, it retains post-confirmation subject matter jurisdiction over matters with a “close nexus” to the bankruptcy case [citing In re Pegasus Gold Corp.,394 F.3d at 1193-94 ], Matters involving “the interpretation, implementation, consummation, execution or administration of the confirmed plan will typically have the requisite close nexus.” Id. at 1194. In this case, the determination whether [C]FTB’s actions violate the confirmation order involves an interpretation of the confirmed plan, and confers continuing subject matter jurisdiction on the court after plan confirmation.
In re Wilshire Courtyard,
As the bankruptcy court acknowledged, in recent years various courts of appeal have articulated the limits on bankruptcy court related to jurisdiction over matters arising after confirmation of a debtor’s reorganization plan.
See, e.g., Binder v. Price Waterhouse & Co. (In re Resorts Int’l, Inc.),
The Ninth Circuit has adopted the “close nexus” test of
Resorts Int’l
for measuring post-confirmation related to bankruptcy court jurisdiction.
State of Montana v. Goldin (In re Pegasus Gold Corp.),
As noted, the Ninth Circuit adopted the close nexus test in In re Pegasus Gold, a seminal decision exploring the limits of post-confirmation bankruptcy jurisdiction. Pegasus Gold involved a dispute between the debtor and the State of Montana over financial responsibility for reclamation and water treatment costs. The parties had reached a settlement agreement approved by the bankruptcy court under which the debtor agreed to establish a new entity, RSC, which would perform the reclamation work. The debtor funded RSC, and a share of RSC became an asset of the debt- or’s liquidating trust established in the debtor’s chapter 11 plan.
After confirmation of the plan, disagreements arose between the State and trust almost immediately, and the State terminated RSC. The Liquidating Trustee then filed a complaint for breach of contract against the State in the bankruptcy court. Although the State objected, the bankruptcy court held it had jurisdiction, and the State appealed.
When the appeal eventually reached the Ninth Circuit, it affirmed the bankruptcy court’s decision in favor of its jurisdiction.
In re Pegasus Gold,
Because the bankruptcy court had subject matter jurisdiction over some of the trustee’s claims, the Ninth Circuit held that the bankruptcy court could also properly adjudicate the remaining trustee claims against the State by exercising supplemental jurisdiction under 28 U.S.C. § 1367, because those additional claims arose from a “ ‘common nucleus of operative facts’ and would ordinarily be expected to be resolved in one judicial proceeding.”
Id.
at 1195,
citing United Mine Workers v. Gibbs,
The Ninth Circuit further explained the meaning of the close nexus test it first articulated in
Pegasus Gold
in
Sea Hawk Seafoods, Inc. v. State of Alaska (In re Valdez Fisheries Dev. Ass’n, Inc.),
The Ninth Circuit most recently visited related to jurisdiction after confirmation in a chapter 11 case in
In re Ray,
When the dispute finally reached the Ninth Circuit, the court decided that the bankruptcy court lacked jurisdiction to decide a dispute between two nondebtors over the meaning of the bankruptcy court’s sale order entered in a since-closed chapter 11 bankruptcy case. Applying Valdez Fisheries, the court concluded that, because the claims were all based upon Washington law, could exist entirely apart from the bankruptcy proceeding, and could not impact the closed bankruptcy case, the state court, not the bankruptcy court, should construe the sale order and adjudicate the parties’ rights. Id. at 1134-35.
We distill several lessons from these decisions for application of the close nexus test as developed in Resorts Int’l, and as adopted and refined by the Ninth Circuit. Stated briefly, to support jurisdiction, there must be a close nexus connecting a proposed post-confirmation proceeding in the bankruptcy court with some demonstrable effect on the debtor or the plan of reorganization.
Applying the Ninth Circuit case law to the facts of this appeal, while it is true Wilshire and the Wilshire Parties were asking the bankruptcy court to interpret its own confirmation order, it seems clear that the bankruptcy court lacked related to jurisdiction to adjudicate the tax issues between the Wilshire Partners and CFTB. All of the acts and transactions required to consummate and implement the confirmed plan in this case had been completed, and the bankruptcy case had long since been closed, by the time the tax dispute between the Wilshire Partners and CFTB arose. More importantly, the outcome of that tax dispute can have no conceivable effect on the implementation of the confirmed plan of reorganization, or on the reorganized debtor, Wilshire. Instead, any consequences from CFTB’s actions will impact only the Wilshire Partners.
Moreover, as in Ray, the central issues in the Wilshire Partners-CFTB dispute concern application of California’s tax laws, not bankruptcy law, to the transactions effected by the confirmed plan. As was the case in Ray, even if the terms of Wilshire’s confirmed plan and the confirmation order are implicated in the resolution of this contest, the California administrative agencies and courts can construe their meaning.
Under Ninth Circuit case law, a close nexus between this tax dispute and the Wilshire bankruptcy case is missing. As a result, the bankruptcy court erred in assuming related to jurisdiction over this dispute.
3. Supplemental or ancillary jurisdiction.
By this conclusion, we also dispose of the Wilshire Partners’ argument that the bankruptcy court could properly exercise supplemental jurisdiction under 28 U.S.C. § 1367(a)
14
because “the common nucleus of operative facts was the interpretation of the Plan, Confirmation Order and section 346 [of the bankruptcy code] to determine
To support the exercise of supplemental jurisdiction, the statute requires that there be another claim as to which the bankruptcy court has original jurisdiction.
Sasson v. Sokoloff (In re Sasson),
The bankruptcy court also concluded it possessed ancillary jurisdiction to interpret and enforce its orders:
Further, a bankruptcy court retains subject matter jurisdiction to interpret and enforce its own orders. See Haw. Airlines, Inc. v. Mesa Air Group, Inc.,355 B.R. 214 , 218 (D.Haw.2006) (“The law is clear that ‘[a] bankruptcy court retains post-confirmation jurisdiction to interpret and enforce its own orders, particularly when disputes arise over a bankruptcy plan of reorganization’ ” (citing Luan Investment S.E. v. Franklin 145 Corp. (In re Petrie Retail, Inc.),304 F.3d 223 , 230 (2d Cir.2002))). Accordingly, this court retains subject matter jurisdiction to interpret and enforce the chapter 11 plan and the confirmation order.
In re Wilshire Courtyard,
“Ancillary jurisdiction may rest on one of two bases: (1) to permit disposition by a single court of factually interdependent claims, and (2) to enable a court to vindicate its authority and effectuate its decrees.”
In re Valdez Fisheries,
Significantly, the two cases cited by the bankruptcy court to support its ancillary jurisdiction deal with interpretation and enforcement of court orders that have an effect on the reorganized debtor and the administration of a bankruptcy estate. In
Hawaiian Airlines,
the debtor commenced a post-confirmation adversary proceeding against an investor for return of property of the bankruptcy estate. The adversary proceeding asked the bankruptcy court to interpret and enforce its Plan Procedures Order, which governed the relationships between the reorganized debtor and potential investors. Specifically, the orders to be interpreted related to contracts between the trustee and parties directly affecting the administration and assets of the estate itself.
Haw. Airlines,
In short, the two cases relied on by the bankruptcy court to support ancillary jurisdiction both involve actions, the outcome of which would directly affect the debtor and the operation or implementation of its plan of reorganization. In the present ap
The Ninth Circuit’s most recent review of ancillary jurisdiction is also found in
In re Ray,
The Wilshire Partners attempt to counter these holdings by citing the Supreme Court’s recent holding in
Travelers Indem. Co. v. Bailey,
Travelers was the principal insurance company for Johns-Manville (“Manville”), a supplier of raw asbestos. When studies began to mount showing a link between asbestos exposure and respiratory diseases, the prospect of overwhelming liability led Manville to file for bankruptcy protection under chapter 11.
Travelers,
The bankruptcy court confirmed a plan of reorganization that created the Manville Personal Injury Settlement Trust (the “Trust”). Manville’s insurers agreed to provide most of the initial corpus of the Trust, with $80 million contributed by Travelers.
Travelers,
Over a decade later, claimants began filing direct actions against Travelers, not based upon Manville’s wrongdoing, but al
The Supreme Court’s Travelers decision principally concerns whether the bankruptcy court correctly interpreted its 1986 orders. However, there were two jurisdictional issues resolved by the Court.
First, the Court ruled that the Second Circuit had erred in concluding that the bankruptcy court did not have jurisdiction to enter the Settlement Order in 1986. Second, the Court ruled, agreeing with the Second Circuit, that the “Bankruptcy Court plainly had [subject-matter] jurisdiction to interpret and enforce its own prior orders.”
The pleading by which respondent invoked the jurisdiction of the bankruptcy court in the present case is in substance and effect a supplemental and ancillary bill in equity, in aid of and to effectuate the adjudication and order made by the same court. That a federal court of equity has jurisdiction of a bill ancillary to an original case or proceeding in the same court, whether at law or in equity, to secure or preserve the fruits and advantages of a judgment or decree rendered therein, is well settled.
Id. at 239.
Viewing the Travelers decision in context, we observe the following: (1) The underlying order that the bankruptcy court interpreted and enforced was an injunction that was negotiated by the parties to the original settlement agreement, and incorporated in the plan of reorganization, and the record clearly indicates that the essential parties (the debtor and the insurance companies) would not have agreed to plan confirmation without the settlement agreement and injunction; (2) the Court’s ruling that a bankruptcy court “plainly” had subject matter jurisdiction to interpret and enforce its own prior orders should be viewed in this context, that the Clarifying Order related to an injunction that had been negotiated and considered an essential part of the plan of reorganization. The citation the Court provided as authority for its general proposition reinforces the principle that exercise of ancillary subject matter jurisdiction must in some way relate to an order that “preserves the fruits and advantages” of the previous order.
The
Travelers
decision was made in the context of a complex history, where the order being interpreted related to an injunction that was a
sine qua non
for the acceptance of the plan of reorganization. After ruling that the bankruptcy court had jurisdiction to approve the original settlement agreement and enter the injunction, the Supreme Court considered the ancillary subject matter question and ruled in light of its previous decision in
Hunt
that the bankruptcy court had jurisdiction. The presence of the
Hunt
citation shows that the Court had in mind that, based on the facts of
Travelers,
ancillary subject matter jurisdiction in that context related back to preserving a benefit (a fruit or advantage) granted in the original order.
The Wilshire Partners attempt to distinguish In re Ray by noting that Ray dealt solely with a request that the bankruptcy court enforce, not interpret, its earlier orders: “This act of interpreting, not merely enforcing, an earlier order distinguishes [Travelers and this case] from Ray because the Ray case merely involves the act of enforcing the effect of the earlier sale order. While enforcement can occur in any court, only the Bankruptcy Court could interpret its own order.” The Wil-shire Partners’ Opening Br. at 7.
Of course, the Wilshire Partners’ argument is incorrect on its face. It is a gross overstatement to say that the bankruptcy court is the only court that could interpret its orders. Courts daily interpret the decisions and orders made by other courts— indeed, one basic task of any court is the interpretation of case law, a process of understanding and applying the orders and rulings of “other” courts.
We also disagree with the Wilshire Partners’ analysis of the Ninth Circuit’s holding in
In re Ray.
In that case, the state court was called upon to interpret the meaning of the bankruptcy court’s sale order in order to determine if a breach of contract occurred. Though asked to do so by the state court, the Ninth Circuit held that the bankruptcy court should not have interceded in the breach contest, and that it lacked jurisdiction to interpret the sale order where the plan had been implemented and the bankruptcy case had long-since been closed.
In re Ray,
In sum, we conclude that the bankruptcy court in this case lacked related to jurisdiction, or ancillary or supplemental jurisdiction, to adjudicate the tax dispute between the Wilshire Partners and CFTB.
CONCLUSION
As the Ninth Circuit observed in
In re Ray,
“[r]eopening of the bankruptcy case is rare, and only used when necessary to resolve bankruptcy issues, not to adjudicate state law claims that can be adjudicated in state court.”
Notes
. Because this bankruptcy case was filed over a decade ago, unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as enacted and promulgated prior to the effective date of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. 109-8, 119 Stat. 23. The Federal Rules of Civil Procedure are referred to as "Civil Rules.”
. The material facts in this appeal are undisputed.
. Through the chapter 11 process, Wilshire was transformed from a general partnership to a limited liability company; in this opinion, "Wilshire” refers to both the original partnership as well as the reorganized debtor/limited liability company.
.According to the plan of reorganization eventually approved by the bankruptcy court, BA was acting as a trustee and servicer for several secured creditors. For convenience, and because it is not essential in this appeal, we will refer to all of these secured creditors collectively as "BA.”
. While Wilshire and the Wilshire Partners argue that CFTB received effective notice or had knowledge of the bankruptcy proceedings by other means, Wilshire apparently did not serve notice of the plan and confirmation hearing on CFTB because it had not filed proofs of claim in the bankruptcy case. Of course, for its part, CFTB did not consider itself to be a "creditor” in the bankruptcy case, since the general partnership Wilshire was not a taxable entity.
. CFTB states in its brief that, upon reopening of the bankruptcy case, and receipt of the Order to Show Cause discussed below, the CFTB hearing officer suspended work on the administrative hearings. There is no other information in the record concerning the status of those administrative hearings.
. Up to this point, the proceedings in the bankruptcy court were conducted, and the decisions and orders entered, by presiding Bankruptcy Judge Bufford. Because of his retirement, this final order was entered by then-Chief Bankruptcy Judge Zurzolo without further hearings. While it is not critical to our analysis, we presume Judge Zurzolo also entered the order without conducting an independent review and analysis of the issues of law previously decided by Judge Bufford. And because we determine, infra, that the bankruptcy court lacked subject matter jurisdiction to enter its various orders, we need not examine any of the possible inconsistencies between the Opinion and the final order.
. The Panel is cognizant of the Supreme Court's recent decision in
Stern
v.
Marshall,
- U.S. -,
. In making its decision, the bankruptcy court relied not on any express provision of Wilshire’s plan characterizing the transactions as something other than a sale of Wil-shire’s assets, but instead, on a "finding” made in its order confirming the plan. We do not say here that, in a case where a chapter 11 debtor clearly invokes the substantive pro
.
Pacor
is among the most influential decisions in bankruptcy law, and forms the analytical framework for related to jurisdiction in the Third, Fourth, Fifth, Eighth, Ninth and Eleventh Circuits.
See, e.g., Fietz v. Great W. Sav. (In re Fietz),
. The bankruptcy court cited to Pegasus Gold for this statement. Pegasus Gold in turn cited to Resorts Int'l.
. 28 U.S.C. § 1367 provides:
Supplemental jurisdiction.
(a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.